Big 'dog' fund puts Schroders top of underperformers' list - but Aberdeen sees four offerings named and shamed

Investment house Schroders has topped an annual list of the worst performing funds in the investment industry.

The 'Spot the Dog' report - which measures underperformance over the past three years - is topped by the firm's UK mid-cap fund, managed by Andy Brough, after it lagged the FTSE 100 by 13 per cent over three years.

Although Schroders had just one fund on the 41-strong list, it is ranked by asset size, meaning the £1.1billion fund tops the table.

Dog days: Four Aberdeen offerings made the latest list of poorly performing funds

Bestinvest said of the fund: 'Veteran manager Andy Brough struggled to keep the fund on a tight leash and wasn't able to keep up with the broader market. Investors are likely hoping that the fund's tilt to stocks that the market considers undervalued is partly to blame – growth stocks have performed better over the last few years.'

However, it acknowledged that the fact only one Schroders fund featured suggested its products were in general 'a superior breed'.

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Bestinvest says: 'In recent years, acquisitive fund group Aberdeen has been one of the worst culprits in the doghouse, both in terms of number of funds featured and assets under management.

'This is partially a result of it gobbling up rival Scottish Widows Investment Partnership (SWIP), which had a number of poor funds. But we have seen a steady decline in their number of qualifying funds and their respective assets under management over the last 12 months.'

Aberdeen is swiftly followed by Neptune and BNY Mellon/Newton who have three funds apiece in the doghouse. Fidelity, Columbia Threadneedle, Investec, Henderson and Jupiter all feature twice on the list.

Who's in the doghouse?

Fund group

Number of dog funds

Funds value (£M)

Previous ranking

Schroders

1

1,168.89

N/A

Fidelity

2

1,059.55

12

Columbia Threadneedle

2

744.17

5

Aberdeen

4

682.11

2

Neptune

3

482.66

19

Investec

2

479.04

N/A

BNY Mellon/Newton

3

472.31

N/A

Henderson

2

445.28

13

Jupiter

2

374.46

6

Halifax

1

367.35

N/A

Data source: Lipper for Investment Management as at December 31 2016

A spokesperson from Schroders said: 'It is important to note that over a five year period the Schroder UK Mid Cap 250 fund is up 110.4 per cent and ahead of its benchmark and the sector average which returned 70.1 per cent.

Underperformance over the last 12 months was due to a large exposure to domestic stocks, which suffered due to a result of the EU referendum, these are now recovering quickly as earnings and dividends come through as expected.'

Aberdeen said in a statement: '2013-2015 was tough period for value-oriented managers, like Aberdeen, QE drove most asset prices indiscriminately higher.

'Last year the environment started to change, Brexit and Trump among other factors, led to increased market volatility which was beneficial to our fundamental approach to investing....our fund performance improved across the board and many outperformed last year.

'With market volatility set to continue, we believe our portfolios are well placed to deliver over the long term.'

One notable omission from Spot the Dog is fundhouse M&G, which has seen a remarkable turnaround in the performance since the last edition, in which it made up 60 per cent of the assets.

To earn the dubious honour of being featured, funds have to have under performed their relevant benchmark by at least 5 per cent over three consecutive 12 month periods.

And it seems performance has generally improved over the past 12 months. This time around, there are 41 funds on the list, compared to 54 a year ago. Accordingly the number of assets 'in the doghouse' has also shrunk, from £18billion to £8.4billion.

Regionally, global equity funds were the most common underperformers, with 16 funds across the combined IA Global and IA Global Equity Income sectors making the list. However, many of these are small funds so altogether they only represent 4 per cent of the sector.

By contrast, nine North American equity funds have been identified as 'dogs' - but they represent 17 per cent of the investment universe.

Funds investing in the UK had a strong showing. Not a single UK Smaller Companies fund made it into this year's list, while across the UK All Companies and UK Equity Income sectors just six funds - representing 1 per cent of the combined assets in the sector - were identified from a large universe of 224 funds.

Bestinvest is part of investment and financial planning company Tilney Group.